What Is the TFA and Who Will Benefit? Here Are the Ins and Outs of the Landmark Trade Facilitation Agreement

Article excerpt

Against a backdrop of anti-globalization sentiment, shuttered regional trade pacts and shifting geopolitics, the World Trade Organization's (WTO) Trade Facilitation Agreement (TFA) flies in the face of the current news cycle. However, the global trade deal that went live 22 February will smooth customs procedures and cut related red tape. Here's what is in the deal and what it means for you and for global trade.

Many people have not heard much about this TFA. On the web it was eclipsed by the Star Wars episode The Force Awakens, which has the same three-letter-acronym.

Through the TFA, governments have agreed to publish a wide range of customs-specific information, including online where possible. This includes outlined measures to help speed up the processing and clearance of goods--such as procedures for accompanying documents to be processed ahead of the arrival of a package--and options for electronic payment of import or export duties. It also encouraged countries to use relevant international standards for import, export or transit formalities, helping to minimize the number of different procedures businesses might have to master to move goods between countries.

The deal even includes a specific provision on perishable goods. It encourages countries to adopt procedures to clear such items as quickly as possible while meeting all relevant domestic requirements and ensuring that importers can properly store these items pending their release. This could be a boon for the world's rural poor, who are often exporters of perishable agriculture products.

In sum, the TFA basically tackles unintentional barriers to trade and issues that exist due to outdated customs systems.

A FAIR DEAL

Earlier trade deals have typically been about setting the duties on buying or selling in other countries' markets or determining how to write national rules, such as regulations and procedures, which treat all products equally regardless of where they are made.

However, it has not always been easy to actually get products across borders. Paperwork, complexity, delays and uncertainty have discouraged all but the biggest and bravest. Ignoring the rules or giving up has often been the approach taken by smaller business.

By cutting transaction costs and improving transparency, the TFA stands to deliver gains to smaller businesses, which can be held back from accessing global markets because of transaction costs and information asymmetry. The WTO estimates that TFA implementation could create some 20 million new jobs, many if not most of which, would be in smaller entrepreneurial enterprises.

The new system is unique in other ways. The TFA allows developing economies to determine when they will implement individual provisions and to clearly identify where they need technical assistance or capacity building. In other words, countries have not bargained for lower standards to avoid legal threats if they are not ready or consider themselves unready. Instead, the same good governance standards will be used for everyone, though some may take longer or need more help to get things working.

Trade facilitation can also have positive effects for the world's poorest countries because border delays may choke export and economic growth opportunities. Some studies have found that countries requiring reams of paperwork for imports are more likely to have a higher poverty rate or higher inequality rate.

The TFA can also help fight corruption, with customs automation leaving less room for corrupt practices that remain rife in some developing countries and act as a significant drag on trade and investment. …